Blockbuster: Where is the rewind button when you need?
Today's Financial News - Posted August 14, 2009
Just when it thought the competition was leveling off, Blockbuster (NYSE:BBI) faces another nasty barrage. The company missed estimates yesterday, now the Street is forcing it to pay.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Competition can be so mean. In a country where the government is doing its best to make sure we all have equal incomes and resources, you would think companies like Redbox, Netflix (NASDAQ:NFLX) and TiVo (NASDAQ:TIVO) would take it easy on Blockbuster (NYSE:BBI) for a few quarters.
After all, isn’t it “un-American” to force your fellow citizens into bankruptcy?
Banks can’t force homeowners delinquent on their mortgages out of their houses. General Motors and Chrysler were saved. How in the world can we stand by and watch Blockbuster go under? Where will I rent my Saved by the Bell Reunion video?
While it is not surprising to see a company that has done the absolute bare minimum to update its business model over the last, oh say, two decades is about to be rewound for the last time, it is time the markets seriously begin to discount the notion.
After yesterday’s horrific earnings report, it is safe to say there are plenty of folks taking bets on just how many days Blockbuster has left on this planet.
Be kind, DON’T rewind
Once yesterday’s closing bell was done vibrating, the company snuck onto the news wire and told investors it managed to lose $0.21 per share ($39.7 million total) last quarter, far worse than even the lowest analyst expectations.
On average, the company’s followers were looking for a per share loss of $0.11. The spread was enough to drive shares down by close to 20% in today’s notably rough session.
Although the quarter’s loss was less than last year’s corresponding period when the company spent $41.9 million more than it made, a same-store sales figure that is 17.8% lower proves that operating cuts and short-term margin boosters will not be able to prop up the company’s losses for much longer.
Unless consumers suddenly start flocking to Blockbuster instead of the growing list of competitors, Blockbuster’s bottom line is only going to sink deeper and deeper.
Just when the company thought the threat from Netflix in the mail-rental business was leveling off, Redbox shows up and slams its in-store business.
Why drive to the nearest Blockbuster and shell out five bucks when you can pay a buck a night from one of the kiosks that seemingly appear on every corner these days?
Blockbuster missed its shot at a first-entry position once again. It is proving it is not necessarily the company’s business model that is lacking, but its management team.
Unless these guys can offer something innovative and appealing to its customers real quick Blockbuster’s dwindling pile of cash is going to become a serious problem.
Shares are already trading well under a buck each. It won’t be long until they are trading back down at 52-week low territory, just above the single-digit range.
If you are holding shares of Blockbuster, you had better return them now. You are not going to like the late fees.
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